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Arun Thukral, MD & CEO, Axis Securities, would rather stay away from cement but tells ET Now that one should look for alpha in auto, consumer durables,
textiles, chemicals and affordable housing.

Edited excerpts:

What are the factors causing this rally? Would earnings have played a major role considering the revival we have seen in Q1 and the hopes riding high now for Q2?

We are inching towards 12,000 and medium to long-term, we are very bullish on the markets and as well as the economy. But yes, there will be short-term jerks coming in between. May be, one of these days the crude will go up and some other news will come on the currency front. But all these will be opportunities because if the Indian economy is going to grow, Indians are going to buy more consumer durables, clothing, spend more on media and entertainment. Net-net, the story is that the markets have to go up but use this opportunity. We are advising our investors to keep pumping money on all these jerks and triggers when they get it.

One has seen revival in some of the corporate banking names and I guess this Q1 earnings really marked the bottoming of all the NPA mess. We have seen that play out on the stock prices. There has is been an almost 25-30% surge in Axis and ICICI Bank put together. Do you think the best part of the trade has already played out?

In case of private corporate banks, what you say is correct. The NPA is more or less going out and we have seen the runups also. But what we are not noticing is that the corporate banks also have a good retail book. May be, that also will get better discounting. So far, only the retail banks were doing well. Now the private corporate banks with a retail book will always perform better and in the next few months or one or two years, they will be outperforming some of the retail banks.

Where else is there scope for playing that alpha? Corporate banks make for one segment but where else?

We continue to be bullish on auto and auto ancillaries because the aspiration level is going up. People are getting into the high-end cars. If you look at the SUV share, the utility vehicle shares have gone up in the last one year from let us say 25% to 28%. Auto will continue to do better and auto ancillaries will have a twin advantage, not only supplying to the listed companies in India but also to all major auto hubs like Hyundai and Honda. They benefit from that growth also and some export potential also. So, they will continue to do well.

The consumption story obviously is looking very strong. There are 125 crore Indians and majority of them don’t own washing machines, refrigerators, AC and other things. So, this space will do very well.

Then comes infra because there is election next year. A lot of money will be spent on infra and may be the light balance sheet companies will do well.

Textile is another, because we are the largest cotton producer and due to trade war, US may not import that much from China and that benefit will come to India. Anyway, India has a better English speaking workforce and may be the wages are much lower here. So, we are much more competitiveness as well.

Even in case of chemicals, production base is shifting to the East and we have better facilities.
Plus, housing improvement, home improvement and housing will also do well because the plan is housing for all by 2022. We are very bullish on affordable housing.

These are some of the places where we are advising our retail investor to pump in money as and when the opportunity comes and accumulate these stocks and sectors at regular intervals.

Where would you be contrarian in this market?

Right now, we are not that bullish on cement. Between 2019 and 2021, a huge supply is coming. As of now, the results have been good and the real estate sector has not done well. Only the affordable housing sector will do well. Maybe right now, we are avoiding cement.